Similar to flags, both the bull and bear pennants consist of three main elements:
The flagpole - the asset’s price must trade higher in a series of the higher highs and higher lows;
Pennant - a consolidation phase takes place between the two converging lines;
A breakout - a break of the upper trend line activates the pattern, while a break of the supporting line invalidates the formation.
As not one market move happens in a straight vertical fashion, the dominating side must play a tactical game and take breaks between the aggressive moves. Hence, the buyers want to consolidate their recent gains and allow for a minor correction lower. After a temporary pause, the price tends to breakout in an explosive manner.
The bullish pennant is a continuation pattern as it tends to help the existing uptrend extend higher. In essence, the pennant helps traders identify the stage at which the trend is currently in. Therefore, it is much easier to trade the pennant, as trading levels are precisely defined by the two converging lines and a flagpole.
HOW TO TRADE BULL PENNANT PATTERN :
As is the case with all candlestick chart patterns, we have two options for an entry. You can open a trade as soon as the breakout candle closes above the upper line of the pennant i.e. the close is confirmed. Contrary, you can eventually opt to wait for a throwback, when the price action returns to the “crime scene” to retest the broken pennant.
The latter offers a great risk-reward since the entry is at a lower price and the stop loss is very close to the entry, hence, you are risking very few pips. The former makes sure that you don’t miss out on a trade as there are no guarantees that a throwback may take place at all.
Take profit is defined by copy-pasting the flagpole, from a point of the breakout (the diagonal trend line). The end point of the trend line signals a level where the bull pennant pattern is completed.
ENTRY AT - 127.
SL - 120,
TARGET - 212.
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The flagpole - the asset’s price must trade higher in a series of the higher highs and higher lows;
Pennant - a consolidation phase takes place between the two converging lines;
A breakout - a break of the upper trend line activates the pattern, while a break of the supporting line invalidates the formation.
As not one market move happens in a straight vertical fashion, the dominating side must play a tactical game and take breaks between the aggressive moves. Hence, the buyers want to consolidate their recent gains and allow for a minor correction lower. After a temporary pause, the price tends to breakout in an explosive manner.
The bullish pennant is a continuation pattern as it tends to help the existing uptrend extend higher. In essence, the pennant helps traders identify the stage at which the trend is currently in. Therefore, it is much easier to trade the pennant, as trading levels are precisely defined by the two converging lines and a flagpole.
HOW TO TRADE BULL PENNANT PATTERN :
As is the case with all candlestick chart patterns, we have two options for an entry. You can open a trade as soon as the breakout candle closes above the upper line of the pennant i.e. the close is confirmed. Contrary, you can eventually opt to wait for a throwback, when the price action returns to the “crime scene” to retest the broken pennant.
The latter offers a great risk-reward since the entry is at a lower price and the stop loss is very close to the entry, hence, you are risking very few pips. The former makes sure that you don’t miss out on a trade as there are no guarantees that a throwback may take place at all.
Take profit is defined by copy-pasting the flagpole, from a point of the breakout (the diagonal trend line). The end point of the trend line signals a level where the bull pennant pattern is completed.
ENTRY AT - 127.
SL - 120,
TARGET - 212.
***** PLEASE LIKE AND COMMENT YOUR VIEWS AND FOLLOW *****
